Mexican Fintech: The Future Of Financial Technology In Mexico

On this day renowned for marking Cinco de Mayo, let us also celebrate Mexico's achievements in the fintech industry. Although Mexican banks were forced to move to alternative networks after hackers attempted to attack their real-time payments network this week, the country has made some significant moves in the financial technology industry of late.

March 2018 saw Mexico's lower house of Congress approve a bill to regulate fintech in the country, promote financial stability and in turn, put a stop to money laundering. The bill was approved by the Mexican Senate at the end of 2017, but is awaiting President Enrique Pena Nieto's signature.

According to Reuters, the law will provide assurance and better awareness when it comes to crowdfunding and the rules around cryptocurrencies, like bitcoin. It also permits open banks and sharing of data by financial institutions through public application programming interfaces, more commonly known as APIs.

President of the association Fintech Mexico, Francisco Mere said:

Open banking recognizes that the information in the hands of the financial institutions is the property of the user, not the institution's, and that it can be brought to other financial intermediaries.

With this, smaller banks and startups would be able to use client information from larger bank through APIs with the user's information. 'This will allow better services, better costs and more inclusion,' Mere said and this will allow fintechs to compete with traditional banks with more gusto.

This ties into research that was found in 2017 that three in four customers were indifferent to, or unhappy with their bank, according to a Gallup poll. Opening up the space further for new fintech players, Mexican startups are focused on those who have not had access to banking before.

As reported in the Financial Times, fintech startup accelerator Finnovista predicted that new financial companies has the potential of taking over 30 percent of Mexico's banking market in the next ten years. Retail banks and payment services would be more so at risk as most of those in Mexico have been working in payments, remittances or lending.

158 fintech companies exist in Mexico and that includes smartphone banking service Albo, mobile phone credit card reader provider Clip, peer-to-peer lender Kubo Financiero and micro-lender Kueski. They all have secured funding and are expected to bridge gaps in the traditional banking industry.

Fintech also has potential in this country because of the convenience that the startups offer. 61 percent of Mexican adults do not have a bank account and there are only 14 bank branches per 100,000 inhabitants, that's 7142 people per branch. As well as this, inefficient transport means that the average time to get to a bank is 42 minutes in rural areas and 22 minutes in cities, according to the National Survey for Financial Inclusion.

On the other hand in 2015, the Pew Research Center found that 35 percent of Mexicans had a smartphone while only 29 percent of adults accessed credit, in comparison to 25 percent in Brazil and 7 percent in Chile. Again, when the regulation comes into effect, although fintechs will have to provide information about their company, this could help improve the credibility of fintech in Mexico.